Board Presentation
1/13/22 Adjourned Meeting
Consider Adoption of Resolution
No. 2022-001, Approving Credit
Agreement Amendment with
JPMorgan
1/13/22 2
Credit Agreement Amendment
• Recommendation:
• 1) Adopt Resolution #2022-001 approving credit agreement amendment with JPMorgan, in a form substantially as attached, increasing the line of credit from $6MM to $15MM and authorize the Chief Executive Officer to execute all documents, subject to Special and General Counsel approval; and
• 2) Approve related Fee Agreement with JPMorgan and authorize the Chief Executive Officer to execute all documents, subject to Special and General Counsel approval.
1/13/22 3
Background
• January 21, 2021
• CEA Board approved credit agreement with JPMorgan
• Line of Credit $6.00M
• Start-up costs and initial cash flow
• Repayment by 1/31/2026
• Power supply costs exceeding estimates due to current market conditions
• December 30, 2021
• CEA Board adjusted rates
• Generate sufficient revenue long-term
• Shortfall in FY 21/22
1/13/22 4
Amendments to Existing Terms & New
Terms
• Increase from $6.00MM to $15.00MM
• Repayment remains unchanged - 1/31/2026
• Additional quarterly and annual reporting requirements • Debt service coverage ratio
• Days liquidity on Hand
• Updates to Annual Budget
• Additional monthly reporting requirements
• Liquidity report disclosing available liquidity
• Report unrestricted cash
• Power supply hedge position
1/13/22 5
Amendments to Existing Terms & New
Terms (cont)
• Report rate increases 5% or greater to JPMorgan within 5 business days of Board adoption
• To include updated financial projection
• Debt Service Coverage Ratio – 1.40x
• Test start changed from 6/30/22 to 6/30/23
• If DSCR not met liquidity on hand exceeding 30 days for 2022/23 and 50 days thereafter can cure
• Can only use this cure two times in any four consecutive quarters • Repayment of $5,000,000 of outstanding line of credit by 12/31/23
• May be re-borrowed within 30 days
1/13/22 6
Amendments to Existing Terms & New
Terms (cont)
• Rolling power supply hedge requirement – inclusive of Escondido and San Marcos load
• May be rolled into future years at JPMorgan discretion • Annual meeting between JPMorgan and CEA to review and discuss market conditions
• Will not be required if CEA demonstrates would be adverse to CEA’s financial position
1/13/22 7
ANNUAL
REQUIREMENTS HEDGING REQUIREMENT
CY 2022 Minimum 80% hedged
CY 2023 Minimum 60% hedged
CY 2024 Minimum 40% hedged
Amendments to Existing Terms & New
Terms (cont)
• Rate adjustment effective 1/1/2022
• CEA Board approved 12/30/2021
• Converts interest rate basis from LIBOR (discontinued) to SOFR (Secured Overnight Financing Rate)
• Interest calculation:
• 3.45% + SOFR Rate + 0.10%
• SOFR 1-Month Rate @ 12/22/21 – 0.05%
• Sample calculation @ 12/22/21
• 3.45% + 0.05% + 0.10% = 3.60% interest
• Staff, legal team and technical consultants vetted terms and determined acceptable and achievable
1/13/22 8
Cost Estimate – through 1/31/2026
• 38% utilization – total draws $6,000,000
• Total costs - $1,697,918
• Interest only costs - $1,667,918
• 50% utilization – total draws $7,500,000
• Total costs - $1,802,508
• Interest only costs - $1,772,508
• 100% utilization – total draws $15,000,000
• Total costs - $2,250,750
• Interest only costs - $ 2,220,750
1/13/22 9
Cost Estimate – through 1/31/2026
• Costs related to credit agreement amendment
• JPMorgan fee - $10,000
• JPMorgan legal – not to exceed $20,000
• CEA legal and technical – estimated $20,000
• Sufficient revenue generated at current rates to cover financing costs, interest and repayment per the terms of the Credit Agreement Amendment
1/13/22 10
Questions/Discussion
1/13/22 11